Problema Solution
The Oliver Company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 9,000 units in 2005. The selling price will be $1 per unit. Variable costs are estimated to be 20% of total revenue. Fixed costs are estimated to be $6,800 for 2005. How many units should the company sell to break even?
Answer provided by our tutors
let 'n' represent the number of units sold
total revenue = 1.00n
total costs = 0.20(1.00n) + 6800
we want to solve for 'n' when total revenue = total costs:
1.00n = 0.20(1.00n) + 6800
0.8n = 6800
n = 6800/0.8 = 8500
the company needs to sell 8,500 units in order to break even